Friday, April 11, 2008

federal Tories on wrong side of sound policy

The Conservatives now have the dubious distinction of being the first Canadian goverment to use the Investment Canada Act to block an investment in the country.

From a MDA employee:

Radarsat2 was developed in part when MDA was a wholly owned subsidiary of Orbital Sciences, a US aerospace company. ... the divisions MDA is proposing to sell experienced their greatest revenue and staff growth while American owned. Those saying that ATK will move the divisions to the US have no idea ....

...ITAR restrictions [are] severely limiting the number of jobs that Canadian owned firms can participate in. The US space budget currently comprises 81% of the world space budget. ... No additional international space projects will come to Canada unless the Canadian government invests in them, and it doesn't seem like this is a priority.

... MDA has attempted various strategies to continue working in the US market while based in Canada. Among other things, they bought US companies in the robotics and aerospace sector, and these purchases were not blocked by the US government. Over time, however, MDA concluded that the only way for these divisions to continue and grow is to have an American parent company. ... MDA is slowly being shut out of the US market and the Canadian goverment is not making plans for the future. Blocking the sale will very likely lead to the loss of these divisions and their capabilities anyway as they run out of work.

Someone also claiming to be an employee says "the ground station that controls this satelite is still under CSA's roof in Montreal Quebec and not under MDA's roof".

According to MDA CEO Dan Friedmann:

There is not enough business in Canada under any government or any budget or any plan to support a company of our size. It's just not possible. We have to export and we have to export to the United States.

On the National last night, Andrew Coyne noted that this proves the Liberals "have no monopoly on craven capitulations". It's "knee-jerk nationalism" and the national security threat is "complete mythology". Kudos to Luc Schulz for being a Blogging Tory who dares to speak out about this. There's no doubt what the polls say, however: looking at the Globe and Mail's online poll at lunchtime Friday, it's 94% to 6% in favour of the Tory decision on close to 18 000 votes.

Terence Corcoran notes:

We can only assume that when Mr. Prentice adds up the net benefit to Canada, he is taking into account the $1.3-billion in value that Alliant will transfer from Minnesota to the largely Canadian shareholders of MDA, including many MDA employees. That money would be in the pockets and treasuries of Canadians who could — as MDA certainly plans — invest in other business ventures that bring even greater benefit to Canada's economy. ...
The government of Canada paid $445-million for priority rights to satellite images over a period of many years into the future. It was an advance on the product, not an investment in the satellite. The satellite is a private, commercial satellite service that collects revenues from many governments all over the world. It is, in fact, a great private-sector space success story. MDA developed the satellite, moreover, when it was controlled by another American company, Orbital.

See also Derek DeCloet of the Globe and Mail.

The worst of this is that any space startup in this country has just seen its private financing opportunities go up in smoke. Why? Because no private investor is going to get into something that doesn't have an exit strategy. The Canadian government has signaled that it will block early stage investors from ever getting out by selling to a US firm, and the world's potential acquirers are overwhelmingly US based.

Jack Layton and the left wing Rideau Insitute are pleased. "Governments in Canada have been willing to equate ... the corporate interest with the public interest," says a representative from the latter. "This is the first government in a long time that has been willing to distinguish between the two, and to understand that the interests of Canadians aren't necessarily served by the interests of large corporations, let alone foreign corporations or corporations based in the United States." Take a bow, Tories. When is the next shoe of the anti-corporate agenda going to drop?

Note that "Canada ranks 25th out of 29 [OECD] nations in terms of openness to foreign business." The OECD has, in fact, called on Canada to lift restrictions for its own benefit. UN disapprove of international foreign policy? Bend the ear! OECD disapprove of international economic policy? Ignore them!

The news gets worse, however. Jack Mintz has released a report that says the "federal government should convert its 10-cent-a-litre excise tax on gasoline into a national carbon tax on all fuels that damage the environment". Followers of this blog know that I entirely agree that a carbon tax is the most efficient CO2 mitigation policy. Yet what does Environment Minister John Baird have to say about a national carbon tax? "sounds like a Liberal idea".


Luc Schulz, B.A. said...

Interesting how we quickly brush aside the past for present political considerations isn't it?

Thanks for the thumbs up. I was expecting a barrage of criticism for my last post...


JR said...

Brian, Excellent post. I've added a link to mine.